Business Appraisal

Are you thinking about buying a certain type of business? Are you passionate and confident about the adventure you are about to get yourself into? If the answer to these questions is ‘yes’, then you have a good chance of making your future business your pride and joy.

Having decided on the business that is likely to prove successful to you, all you need now is to get a professional business appraisal. This assessment will guide you along your trip and help you turn your aspirations into a success story.

Evaluating a business

It’s all too easy to get over excited about your new adventure and blind yourself to some of the pitfalls of your potential business. Evaluating the business properly is an important part of the purchasing decision; it establishes the true value of the business, so you can make an intelligent decision and create realistic plans.

You will also need to consider the ‘due diligence’ phase of the process, which you might like to think of as ‘kicking the tyres’. Put simply, this is the study of the risks your potential deal posses, and which can mean the difference between success and failure.

How to value a business

Regardless of what type of business you are considering buying, a detailed and objective appraisal is fundamental. To make sure that you have left no stone unturned, your valuation should cover four basic areas:

Business Development – to establish overall strengths and weaknesses, and to devise a realistic route to take your business forward

Market and Products – to understand the needs of the market and ensure that the business can generate profitable sales to meet those needs

People – to ensure this most important resource is being effectively used and people are reaching their true potential

Financial – to establish cash funds are available to re-invest in the business.

This checklist will help you collate important information on the business you are looking at buying. It doesn’t cover all possibilities, but if you use it as a basis for future questioning, it will help establish a clear picture of what is it you are buying. The list does not cover due diligence, so bear in mind that must be conducted separately.

Always seek a second opinion, ideally from a business professional

Once you have gathered all the relevant information, make sure you ask a third party for objective advice. Someone with a good business knowledge will review your appraisal and the business plan that you have developed from the information gathered. They will play devil’s advocate and will question you on your assumptions and projections to identify any potential issues.

Your business journey will have many ups and downs, but ensuring that you have the right motivation and that your appraisal is both objective and realistic, will give your new adventure the best chance of success.